Chancellor Rachel Reeves billed today’s Budget as one that “cuts waiting lists, cuts the cost of living, and cuts our debt and borrowing.” But beyond the interminable preamble, detail was thin on the ground and reaction from business leaders mixed, with many questioning whether the package will meaningfully boost growth at all.
In an embarrassing prelude, a “technical error” saw the Office for Budget Responsibility publish much of the material before Reeves reached the despatch box – an error that may prove the day’s defining tech story.
There were a few nuggets of direct relevance to the digital and tech sectors, not least:
- A new 40% investment allowance for technology and equipment
- No change to R&D tax credits
- Higher duty on online gaming and betting
- A new per-mile tax for electric vehicles
There were also some specific spending announcements, including £14 million for semiconductors and AI in Wales, a £16 million science centre in Darlington, £13 billion for Metro Mayors, and £820 million for the Scottish government as devolution gathers pace, but overall it was all a little vague – teasing mentions of AI and start ups, and praise for the defence tech sector, but little in the way of substance.
Roger Phillips, tax partner at Blackburn’s PM+M, said the best outcome may be some stability at last, after months of leaks, leading up to the most spectacular of all this morning, but criticised the lack of a long-term growth plan: “Plenty was said about growth and entrepreneurialism, and we heard about expansions of the availability of EIS and VCT, but we could have heard much more.” He called the package “many small ‘picky bit’ type changes” shaped by political imperatives, warning that the three-year freeze on income-tax allowances and thresholds, extra tax on investment income, and new levies on high-value property and consumption shift the burden without driving growth.
Phillips said the living wage rise and freezes on some household costs will help low earners, but fiscal drag will pull more people into tax amid a personal allowance that “should be closer to £17,000 if it had increased with inflation.” Middle-income earners, he added, face a “punitive” cumulative effect, compounded by curbs on popular salary sacrifice benefits. For businesses, he saw “a patchwork system of reliefs rather than the coherent, long-term framework required to genuinely boost growth and competitiveness,” particularly for SMEs.
Financial crime risks could rise as wealth is restructured in response to the tax mix, warned Phil Cotter, CEO at Leeds digital ID specialist SmartSearch. “The policies announced will trigger a major wave of financial restructuring… Financial criminals will exploit the moment.” With anti-money laundering supervision in flux, he urged “rigorous verification” of funds and ownership to prevent illicit flows from being swept through the system.
Fred Soneya, co-founder and general partner at VC Haatch, a leading investor in Northern tech, was uncharacteristically positive about at least one angle for the tech sector: “Leaving R&D tax credits alone was a good outcome,” he stated.
Soneya was similarly positive about Reeves’ decision not to introduce a wealth tax: “The fact that some form of ‘wealth tax’ wasn’t introduced is good news, even if the broader tax landscape has become less favourable across the past two Budgets. A targeted wealth tax would likely have a negative impact on private investments – such as the availability of private equity and VC funding for high-growth startups – making it counterproductive for productivity and economic growth.”
That’s not to say the tech investor was entirely in step with Reeves’ plans, however: “The best thing we can say about this Budget is that it’s over,” he added.
“All the noise and speculation in recent months have been damaging to business and investor confidence. Uncertainty creates anxiety, which stifles innovation and hinders growth, while there were no major wins for startups or SMEs today, at least all the rumours will cease, and businesses can now plan with more clarity. Given a stable environment, the best business leaders find a way forward, and investors can pursue new opportunities with greater confidence.”
One bright spot in Reeves’ plans was an additional £300m for the NHS as it continues to fight historic waiting lists. Brid Graham, senior vice president at healthtech Presidio had plenty of ideas about where that should be focused: “If the government is serious about cutting waiting lists and protecting patient safety, modern, AI-ready infrastructure must be a priority,” he said, citing her own company’s research that revealed 98% of clinicians say outdated systems cause delays or errors.
Unions, meanwhile, were pleased to see an end to the previous government’s austerity project, with Reeves seemingly looking at public spending as a means of kick starting the sluggish economy: “The challenge for Labour is to grip the task of rebuilding our economy and country, lock in essential investment to create growth, and start bringing a bit of hope to people,” said GMB general secretary Gary Smith.
Overall, mixed to muted, and while today’s measures may offer some short-term stability after all the, by and large unrealised, scare stories, without a lot more detail emerging in the wake of Reeves’ speech, the 2025 Budget risks being remembered less for its economic impact than for its appallingly timed “technical error.”
